On a day the rupee slumped intra-day to an all-time record low of 57.37 against the U.S. dollar, Finance Minister Pranab Mukherjee assured the nation that the government, in consultation with the Reserve Bank of India (RBI), would take steps to contain the free fall of the currency.
Expressing concern over the rupee posting this year’s sharpest single-day slide of 85 paise on Friday, Mr. Mukherjee said: “I have asked the DEA [Department of Economic Affairs] Secretary to discuss [the] rupee situation with RBI Deputy Governor. DEA Secretary [R. Gopalan] will take steps to contain [the] rupee slide”.
Among the steps being taken to arrest the slide, the RBI has directed the oil marketing companies to pick up 50 per cent of their foreign exchange (dollar) requirements for oil imports from the State Bank of India. Beyond that, however, market men stated that even in the wake of steep exchange rate volatility witnessed during the day, the Central bank did not intervene to contain the free fall.
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In the event, while the Indian currency has already slipped by more than 20 per cent over the past one year, traders are anticipating a further depreciation and expect the rupee to breach the 58 mark in the days ahead.
In recent weeks, while the RBI took a slew of measures to encourage exporters to bring back a portion of their foreign exchange earnings and freed banks to offer a higher rate of interest on NRI (non-resident Indian) deposits, the government has also put in place specific supportive steps to attract foreign exchange inflows. One such is the relaxation in portfolio investment norms.
Pointing to these supportive measures while speaking at an Assocham seminar earlier during the day, Finance Secretary R.S. Gujral said: “The government [is taking] action in terms of supportive measures for ensuring higher inflows of foreign exchange...government is conscious of [situation] and is taking appropriate action.”
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